Interim
Joint Committee on Appropriations and Revenue

Minutes
of the<MeetNo1>3rd Meeting

of the 2007 Interim

<MeetMDY1>September 27, 2007

The<MeetNo2>3rd meeting of the Interim Joint
Committee on Appropriations and Revenue was held on<Day>Thursday,<MeetMDY2>September
27, 2007, at<MeetTime>1:00 PM, in<Room>Room 154 of the Capitol Annex. Senator
Charlie Borders, Chair, called the meeting to order, and the secretary called
the roll.

Chairman Borders introduced a committee resolution honoring
retiring Deputy Director Janie Miller. Chairman Moberly read the resolution
and commented on Ms. Miller's integrity and work ethic. Senator Boswell moved
for the adoption of the committee resolution. The motion was seconded by
Representative Webb. The motion carried by voice vote.

Representative Ford moved for the adoption of the minutes
from the previous meeting. Senator Tori seconded the motion. The motion
carried by voice vote.

Ms. Christie McCravy, Board Chair of the Kentucky Center for African American Heritage addressed the committee regarding the center's
work and desired future expansion. Speaking with Ms. McCravy were Tyler Allen,
board member, and Raymond Burse, Vice Chair of the Board for the center. Ms.
McCravy discussed the progress towards completion of the project, which is
currently 67% complete. She also discussed the educational opportunities that
will be offered by the center to Louisville and the state. Ms. McCravy then
presented a virtual video tour detailing the center at completion, and future
desired expansion of the center. She requested $750,000 during the next biennium
for educational programs and administration. Mr. Burse discussed how the
center would utilize the funds, stating the funds would allow the center to
expedite the processing of the Memorandum of Agreement to accelerate the
completion of the center.

Senator Harris asked if the center will feature a display
concerning the Tuskegee Airmen. Ms. McCravy replied that the permanent exhibit
would address the civil war and Camp Nelson. There will be traveling exhibits
presented at the center which could possibly include an exhibit on the Tuskegee
Airmen.

Representative Napier stated that an African American
Heritage Festival has been proposed for his district and he asked if the center
could assist in getting the festival started. Ms. McCravy stated that yes, the
center could assist in festival start up, as well as traveling educational
programs.

Representative Draud asked about the size and total cost of
the facility. Ms. McCravy replied the center is approximately 100,000 square
feet with an estimated $26 million cost.

Representative Crenshaw asked what the offered loan amounts
are for US Bank and Community Ventures. Ms. McCravy stated that the Community
Ventures loan has expired, but the US Bank loan is $7.5 million.

Senator Boswell suggested the center make a proposal to both
candidates for governor.

Next, Mr. Tom Platt of Management Partnership Services, Inc.
(MPS) discussed student transportation funding and operations in Kentucky. The 2006 budget bill (House Bill 380) called for a study to evaluate the formula
for allocating state transportation funds to local school districts. Also, the
study was to evaluate local school district transportation operations. Mr.
Platt stated that MPS was contracted with to conduct the study and report to
the Legislative Research Commission. He briefly discussed the background of
MPS.

Mr. Platt stated that MPS studied four key aspects in their
report which were: 1) student transportation funding in general; 2) evaluation
of the current formula in practice; 3) evaluation of student transportation
operations in Kentucky; and 4) alternate formulas and recommendations. First,
he discussed transportation funding in general providing an overview of the key
objectives for funding mechanisms. He also discussed current approaches
utilized by the 50 states.

Next, Mr. Platt discussed the evaluation of the current
funding formula in practice. He stated that the formula distributes funds on
the basis of the average cost for a given level of student density. The funds that
are received are not directly influenced by how much is spent, therefore
spending more or less in a given year will not alter the amount of funding
received. He said that at the local district level the understanding of formula
design and purposed is mixed and that funding implications are generally not
considered as part of operational decisions. In most districts, decisions are
made based on local service needs, expectations, and financial constraints. Mr.
Platt stated that the current funding formula is not efficiency based and does
not motivate districts to reduce costs.

Mr. Platt then discussed transportation operations in Kentucky. He stated that the state has diverse geography, but is dominated by small, low
density service areas and there is a low demand for enhanced services. He said
the average cost to run and operate a school bus is low in Kentucky relative to
the national average and the average cost to transport each student is
comparable to the national average. Mr. Platt concluded that industry best
practices are being applied in Kentucky to the extent they are not limited by
the operating environment. He discussed the low usage of routing software in
the state.

Mr. Platt discussed funding formula alternatives and
recommendations. He said that one alternative would be allocating an equal
amount for each eligible student. This simplifies the administrative process
and provides clear methodology. However, this method does not promote
efficiency or account for important factors outside the control of local
districts. A second alternative is to retain the current funding formula, but
to improve its formulation. This would improve equity by treating current
inputs as site characteristics. A third alternative is to implement a new
formula model. This is called an efficiency frontier model. This model
incorporates all relevant site characteristic, provides full, but not surplus,
funding for the most efficient districts, and incorporates an inherent
efficiency motivation by providing proportionately less funding for less
efficient districts. Mr. Platt said that this style of funding formula is the
most complex and difficult and the most costly to administer.

Chairman Borders asked if the state could purchase and
implement routing software in areas where it is not utilized. Mr. Platt
replied that he can not comment on the cost of systems because they vary
widely. He did say that there is precedent in at least one state where routing
software has been implemented on a statewide basis.

Representative Comer asked if any states have privatized
their public school transportation. Mr. Platt replied that he is not aware of
any state systems that have privatized entirely, but that a few local districts
have.

Representative Draud asked if interviews were conducted in
researching the report. Mr. Platt stated that seven regional meetings were held,
which were sponsored by the educational cooperatives around the state. Local
school district transportation officials and school officials attended those
meetings. Representative Draud asked what complaints were offered by the
officials. Mr. Platt stated that the primary complaint was lack of funding.

Representative Clark asked what state at present has the
best funding formula. Mr. Platt said that if the goal is to promote efficiency
the formula must be complex and that it would be hard to single out one
specific state as the best example.

Representative Webb asked what the best formula would be for
states with such contrasting demographic and geographic realities such as Kentucky. Mr. Platt responded that the best formula is one that promotes efficiency and
incorporates into the formula factors that account for uncontrollable aspects
of service delivery.

Representative Wayne asked if utilizing mass transit for
pupil transportation is beneficial to a school system. Mr. Platt replied that
he is not aware of any local district utilizing mass transit in Kentucky. This approach is commonly used in urban areas around the country, but there are
issues as to transportation availability.

Senator McGaha stated that with the diversity in our state,
it is almost impossible to implement an equitable funding formula with meets
every local district needs.

Senator Harris asked what causes the differences in how much
comparable districts spend on pupil transportation. Mr. Platt responded that
typically the level of services offered by the district is the largest
determining factor.

Chairman Borders thanked those who testified. He informed
the members that the next meeting would be held on October 18, 2007 in Lexington at Keeneland. Staff will provided details to the members.

There being no further business, the meeting was adjourned
at 2: 25 p.m.